But the laws governing some of the Western banks with large exposures to the Dubai World debt may prohibit them from voluntarily accepting less than par on the bonds.

Recall that when the US sought to win concessions from AIG creditors, it was told that the counterparties would not voluntarily take a haircut. (Except for UBS, which offered to take a 2% haircut.)

Some of those creditors—including Soc Gen, Deutsche Bank and Barclays—are big holders of Dubai bonds.

French regulators reportedly told US regulators that SocGen and Calyon were legally barred from accepting less than par value for swap contracts if AIG did not file for bankruptcy. So will French regulators also refuse to allow SocGen and BNP Paribas to take a haircut on the Dubai bonds?

If Dubai World does win concessions from its creditors, this may prove embarrassing for Tim Geithner and other US officials who failed at this task when it came to AIG.